from the and-that's-even-before-you-start-to-factor-in-the-costs dept

Techdirt has written hundreds of stories about TPP over the years. So many of those have revealed troubling aspects of the deal that it's hard to single out the worst. But there can be no doubt that one of the most extraordinary facts is that the US and the other TPP nations were negotiating for eight years the biggest so-called trade deal in history with only the sketchiest idea about its likely benefits. Instead, politicians and supporters simply assured the public that it would all be great, honest. And yet when the rigorous econometric studies began to appear, they consistently showed that TPP would produce almost nobenefitswhatsoever.

Upon hearing that a planned course of action designed to bring financial gains would do nothing of the kind, most rational people in ordinary life would try something else. But not the politicians and TPP negotiators, who carried on despite these clear signs that TPP was simply not worth the effort. They either ignored these studies completely, or at most said that the only reliable predictions worth considering were the official ones, which would come from the US International Trade Commission (USITC) once TPP's text had been finalised. Last week, the USITC released its massive 792-page report (pdf). Here's a key part of the summary:

The Commission used a dynamic computable general equilibrium model to determine the impact of TPP relative to a baseline projection that does not include TPP. The model estimated that TPP would have positive effects, albeit small as a percentage of the overall size of the U.S. economy. By year 15 (2032), U.S. annual real income would be $57.3 billion (0.23 percent) higher than the baseline projections, real GDP would be $42.7 billion (0.15 percent) higher, and employment would be 0.07 percent higher (128,000 full-time equivalents).

Like all the figures mentioned there, that 0.15% GDP boost would be achieved in 2032, which means that on average TPP is expected to produce an extra annual GDP boost of roughly 0.01%. Public Citizen's Global Trade Watch (pdf) pulled out a few other interesting figures from the report, which:

Estimates a worsening balance of trade for 16 out of 25 U.S. agriculture (p. 124), manufacturing (p.228), and services (p. 340) sectors that the ITC selected to feature. This includes vehicles, wheat, corn, autoparts, titanium products, chemicals, seafood, textiles and apparel, rice and even financial services. Autoparts would be hard hit with employment projected to decrease by 0.3 percent.

Estimates the TPP will increase the U.S. global trade deficit by $21.7 billion by 2032.

Projects even the U.S. services trade balance will worsen by 2032 as service imports of $7 billion swamp the estimated increase in exports of $4.8 billion (p. 35).

Global Trade Watch also notes that the USITC's track record for predictions is not good:

The actual outcomes of past trade pacts have been significantly more negative than ITC projections generated using the same methodology employed for the TPP study. This makes today’s unusually negative ITC findings on the TPP especially ominous.

The USITC also has not done well in projecting winning and losing sectors from trade agreements. A recent analysis by CEPR found no relationship between the industries that were projected to be export and import gainers and losers from the trade deal with Korea and the actual outcome.

He goes on to point out an even more worrying aspect of the latest modelling:

this analysis does not seem to incorporate any of the losses associated with the stronger and longer patent and copyright protection required under the TPP. Higher prices for drugs, software and other protected items are likely to impose substantial costs on the United States and other parties to the agreement. For example, the New Zealand government estimated that just one provision -- extension of copyright protection from 50 years to 70 years -- would cost the country 0.024 percent of GDP. This amount is 10 percent of the total gains projected in the USITC report. It is entirely possible that a full assessment of the cost of these provisions would show that the TPP would lead to a net reduction in income for the United States and other countries in the pact.

That's a hugely important point. On the rare occasions when TPP supporters have made specific claims about the economic benefits of TPP, they have consistently failed to take into account any downsides. It's like going into a business deal only looking at the benefits, and ignoring any possible costs.
Against this chorus of disapproval, it's interesting to see how TPP supporters try to spin the USITC's miserable figures. Here's what the Business Roundtable, "an association of chief executive officers of leading U.S. companies", has to say:

"The release of the ITC report marks an important step in the process for considering the TPP. We look forward to reviewing the report's findings as we continue to highlight the benefits of the TPP to American businesses, farmers and workers," said Tom Linebarger, Chairman and Chief Executive Officer of Cummins Inc., and Chair of the Business Roundtable International Engagement Committee. "The TPP will remove many foreign barriers to U.S. goods and services and impose strong, enforceable rules for trade -- enabling U.S. manufacturing, services and technology companies to grow their sales to important international markets."

"The TPP sets high standards and reflects American priorities, and if the United States doesn't take the lead in shaping international trade rules, our economic competitors will," continued Linebarger.

That's it: the Business Roundtable could not find a single number to quote that made TPP look like a good deal. What about the ultimate TPP cheerleader, US Trade Representative Michael Froman? What did he have to say about the report? This:

"The ITC report illustrates for the American people and members of Congress the benefits TPP will deliver in their own backyards. If you are a poultry farmer in Delaware this report shows that chicken exports will increase by $174 million annually under TPP. If you are a rancher in Nebraska this report shows that beef exports will increase by $876 million annually under TPP. And if you build cars in the Midwest, this report shows that auto exports will rise $1.95 billion annually. With today's study as another important data point, our work with Congressional leaders on TPP implementation and enforcement will continue and accelerate in the days and weeks ahead."

Froman decided to pretend it was all about little numbers, and to gloss over the fact that when you add up all those little numbers to find out TPP's total benefit...you still get a little number. Froman also fell back on that old favorite -- fear-mongering about China:

"What cannot be quantified in this study or any other is the cost to American leadership if we fail to pass TPP and allow China to carve up the Asia-Pacific through their own trade agreement. If we allow China to beat us in defining the rules for trade it will undercut our workers and businesses and prevent us from taking badly needed steps to improve worker rights, bolster intellectual property protections, and protect the environment through TPP."

In other words, yes, it's true TPP offers absolutely negligible benefits for the US but oh, look, a squirrel...

from the anti-innovation dept

Last year, Techdirt wrote about how one of the most significant breakthroughs in the field of genomics is already embroiled in a nasty patent battle. But it's not just the fundamental techniques in this field that are being held back by selfish attempts to "own" key technologies. An article in the MIT Technology Review reports that the dominant manufacturer of DNA sequencing machines, Illumina, is trying to use patents to throttle an upstart rival:

Illumina said today it would try to block commercial sales of a disruptive new DNA sequencing instrument developed by a high-flying British rival, Oxford Nanopore.

In a patent lawsuit [pdf] and a separate complaint [pdf] with the U.S. International Trade Commission, Illumina said the British company's cutting-edge DNA sequencing devices contain stolen ideas and should be stopped at the docks.

Oxford Nanopore denies that it is infringing on any patent that Illumina controls, but needs to be able to prove that not just once, but twice. As well as suing in the courts, Illumina is trying to use the International Trade Commission (ITC) loophole that Techdirt has been warning about for many years now. The ITC does not award damages, but can impose injunctions that block the import of items it deems infringing. And that's precisely what Illumina wants, in order to stop the British Oxford Nanopore from challenging it in the US with its new technology, which offers important advantages over Illumina's systems:

Illumina's refrigerator-sized instruments are fast and accurate (see "Why Illumina Is Number One"). But because it works differently, Oxford's MinION, as the device is called, is small enough to be portable (it's about the size of a cell phone) and reads out very long stretches of DNA.

Although it's slower and less accurate than Illumina's instruments, nanopore technology threatens to become a competitor as scientists find entirely new applications for it like sequencing Ebola viruses and diagnosing patients from a makeshift lab in Guinea.

According to the MIT Technology Review article, which gives more details on how the nanopore technology works, more than a thousand teams are already using Oxford Nanopore's pocked-sized sequencing unit. It offers capabilities that Illumina not only cannot match but is unlikely to match any time soon:

In asking U.S. trade officials to investigate Oxford and possibly bar imports of the MinION to the U.S., Illumina could anger researchers, since no comparable technology is available. Illumina has never announced plans to sell a nanopore product of its own.

So, rather than competing by launching its own equivalent product, a big, successful company that dominates a market is trying to use legal actions to squash an exciting new technology before it becomes a serious threat. In other words, yet another case of patents being used not to innovate, for the benefit of the public, but to stifle innovation, solely for the benefit of the current market leader.

from the try,-try-again dept

Last year, when the Sony emails leaked, and it was revealed that the MPAA was still totally focused on bringing SOPA back through alternative means, one of the strategies explored was getting the International Trade Commission (the ITC) to set up a sort of secret SOPA. The ITC is an already problematic government agency that is already widely abused by patent holders. Basically, you can ask the ITC to "block" some sort of "illegal foreign competition." And for patent holders, this has meant going to the ITC and claiming that a foreign firm (or a domestic firm that is importing products) is violating its patents, and thus the ITC should issue an injunction blocking any such products from entering the US at its borders. This is already troublesome in the patent context, because the ITC process is entirely separate from either the USPTO's review of patents or the federal courts -- and actually has different rules. So even if a court might decide that a patent is invalid under existing rules, the ITC may have already started blocking the import of products, claiming patent infringement. It basically allowed patent holders to get two bites at the apple (sometimes, quite literally at Apple).

The MPAA's theory was that if the ITC can block "infringing products" at the border, why can't it basically do the same thing for "infringing content." The goal of the strategy -- which even the MPAA's legal experts admitted was a long shot -- was to find a key case, in which "digital goods" of some sort went before the ITC, and see if it could get a ruling in its favor. It found that case in the ClearCorrect case, in which the company ClearCorrect faced off against the ITC over its 3D printing of clear plastic braces, custom-designed for each patients' teeth. While another company holds patents on a similar process, ClearCorrect tried to get around this by doing the computer work in Pakistan, and then sending the completed digital model back to the US to be printed. Thus, ClearCorrect argued, it was not violating the patents in the US and was just getting a digital file. The ITC ruled against ClearCorrect, and the company appealed the ITC's ruling out into the federal court system where the case was heard by the appeals court for the Federal Circuit (CAFC). The MPAA weighed in supporting the ITC, hoping to give teeth to the idea that the ITC can block "digital goods" at the border for "infringement." Thankfully, the good folks at Public Knowledge weighed in on the other side, noting what a massive and dangerous expansion of power this would be for the ITC in a very digital world.

Thankfully, today, the CAFC sided with ClearCorrect and against the ITC (and the MPAA), noting that the ITC has no jurisdiction to issue injunctions on digital products. The decision was written by CAFC chief judge, Sharon Prost (who has really shaken up CAFC in a good way since taking over last year). Prost correctly notes that the ITC's original decision was a massive, unauthorized expansion of the ITC's jurisdiction, without the necessary Congressional approval. In short:

The Commission’s decision to expand the scope of its
jurisdiction to include electronic transmissions of digital
data runs counter to the “unambiguously expressed intent
of Congress.”

Prost notes that the ITC's charter allows it to issue injunctions to block the import of "articles" at the border, and "it is clear that 'articles' means 'material things,' whether when looking to the literal text or when read in context 'with a view to the term's place in the overall statutory scheme.'"

The judge notes that, while digital content has some sort of physical aspects, that does not make it the same thing as physical property:

We recognize, of course, that electronic transmissions
have some physical properties—for example an electron’s
invariant mass is a known quantity—but commonsense
dictates that there is a fundamental difference between
electronic transmissions and “material things.”

Going into more detail, Prost basically just reads the law:

The Commission’s jurisdiction to remedy unfair international
trade practices is limited to “unfair acts” involving
the importation of “articles.” 19 U.S.C. § 1337(a).
Thus, when there is no importation of “articles” there can
be no unfair act, and there is nothing for the Commission
to remedy. Here, the only purported “article” found to
have been imported was digital data that was transferred
electronically, i.e., not digital data on a physical medium
such as a compact disk or thumb drive. The Commission’s
April 3, 2014, majority opinion devotes twenty-one pages
of analysis to the question of whether “articles” encompasses
digital data and ultimately concludes that it does.

But Judge Prost notes that the ITC is just wrong about that. And then starts digging in deeper and deeper about how ridiculous the ITC was in trying to make this massive landgrab. She spends pages citing the dictionary (actually, multiple dictionaries) as to why the ITC is just wrong. And then moves on to point out that it's pretty clear what Congress meant and the ITC seems to have just decided for itself to try to expand its powers. It's a pretty thorough smackdown. After making it clear that the ITC clearly misread the statute, Prost then goes on (even though she doesn't have to) to smack down the ITC's interpretation as "unreasonable." Again, she returns to the dictionary and notes that it appears the ITC looked at it, and then decided to pretend it said something different.

The Commission’s analysis of dictionary definitions
evidences the irrationality of the Commission’s interpretation
of the term “article.” While the Commission ostensibly
analyzes various dictionary definitions, it fails to
adopt a definition consistent with any of the definitions it
references. For example, as discussed in the prior section,
the Commission turns to the 1924 edition of the Webster’s
dictionary for the definition of “article,” but rather than
adopt that definition it concludes that it will “embrace a
broader meaning that describes something that is traded
in commerce.” ... In other words,
it generates its own definition, unrelated to the definition
provided by the dictionary.

Furthermore, the Commission inexplicably cites to
several dictionaries in two footnotes that support “articles”
being defined as “material things,” but provides no
analysis as to why these dictionaries should not be considered.

Even worse, she notes that the ITC not only misread the legislative history on the Tariff Act, but appears to have simply cut out a key phrase that undermines its argument. Specifically:

The Commission’s Opinion cites the Senate
Report, S. Rep. 67-595, as authority for this conclusion
and then quotes it as follows:

The provision relating to unfair methods of competition
is broad enough to prevent every type and
form of unfair practice and is, therefore, a more
adequate protection to American industry than
any antidumping statute the country ever had.

However, the actual quote reads as follows:

The provision relating to unfair methods of competition
in the importation of goods is broad
enough to prevent every type and form of unfair
practice and is, therefore, a more adequate protection
to American industry than any antidumping
statute the country ever had.

.... The Commission’s
omission of the phrase, “in the importation of
goods” is highly misleading; not only was a key portion of
the quote omitted, but it was omitted without any indication
that there had been a deletion. Furthermore, while
we may agree that the quote, as incorrectly stated by the
Commission, would indicate a broad authority for the
Commission, the phrase “in the importation of goods”
clearly limits the Commission’s authority. And as we
discussed above, it limits it in such a way as to exclude
non-material things. Because the Commission uses this
misquote as its main evidence that the purpose of the act
was to cover all trade, independent of what form it takes,
the Commission’s conclusion regarding the purpose of the
Act is unreasonable.

Yeah, simply deleting the phrase that undermines your argument, without even putting in some "..." or something is pretty bad.

There's a concurring opinion from Judge Kathleen O'Malley that is also a good read, noting how ridiculous it is that the ITC magically thinks it has the right to regulate pretty much the entire internet, without any actual expertise or mandate from Congress:

The Commission has concluded that it has jurisdiction
over all incoming international Internet data transmissions.
It reaches this conclusion despite never having
purported to regulate Internet transmissions in the past,
despite no reference to data transmissions in the statute
under which it acts, despite an absence of expertise in
dealing with such transmissions, and despite the many
competing policy concerns implicated in any attempt to
regulate Internet transmissions. The Internet is “arguably
the most important innovation in communications in a
generation.”... If Congress intended for the Commission
to regulate one of the most important aspects of modernday
life, Congress surely would have said so expressly.....

Although the Commission’s jurisdiction over imported
physical goods is undeniable, it is very unlikely that
Congress would have delegated the regulation of the
Internet to the Commission, which has no expertise in
developing nuanced rules to ensure the Internet remains
an open platform for all.... Instead, the responsibility lies with Congress to decide
how best to address these new developments in technology.....

Indeed, Congress has enacted laws and debated bills
whose intent is to balance an interest in open access to
the Internet and the need to regulate potential abusers.... Not once in
these debates has Congress said or implied that it need
not concern itself with these issues because it had already
delegated the authority to do so to the Commission.

Good stuff. O'Malley is actually arguing that the majority decision doesn't even need to go through the whole "Chevron" test it does, about interpreting the law because it's so blatantly obvious that the ITC has no authority here, but if it must go through with that interpretation test, then she agrees with Judge Prost that the ITC is just wrong.

There is a dissent, from Judge Pauline Newman who basically says "well, the ITC regulates international commerce, and commerce today is digital, so it's all good."

The purpose of Section 337 to provide a facilitated
remedy against infringing imports is beyond dispute. The
panel majority’s removal of this remedy from a preeminent
form of today’s technology is a dramatic withdrawal
of existing rights, devoid of statutory support and
of far-reaching impact. The majority’s ruling, that digital
goods cannot be excluded under Section 337 because
digital goods are “intangible,” is incorrect.

Given all that, don't be surprised to see an attempt to appeal this to the Supreme Court (or en banc for CAFC). But, at least for now this is a good and important decision that wipes out one of the MPAA's secret plans to bring SOPA in through the back door. Kudos to Public Knowledge for focusing in on this case and making the case for keeping the internet open.

from the to-stop-pirates,-sometimes-you've-got-to-break-a-few-internets dept

When SOPA died its inglorious death, the MPAA's best shot at ISP-level site blocking died with it. But the MPAA is nothing if not stubborn and is still willing to wreak havoc on the internet in exchange for a slight dip in infringement.

According to a leaked document from the MPAA's law firm [pdf link] and two publicfilings in support of the International Trade Commission (sent over by Charles Duan of Public Knowledge), the movie industry is hoping to use the agency's new willingness to regulate digital transmissions like physical goods as a foundation for site blocking.

As we've discussed for years, the ITC has been an active player in helping US patent holders go after those they believe are infringing. Generally, this has taken the form of blocking imports of infringing physical goods -- that the ITC deems as infringing (using different rules than the US court system). This has often allowed patent holders two separate bites at the apple -- one in the courts, and one at the ITC. But a recent case saw the ITC shift its focus -- and its purview -- in response to some circuitous patent infringement. Russell Brandon at the Verge details the case that has led to the MPAA's next attempt at site blocking.

The heart of the case is a company called ClearCorrect, which 3D prints clear plastic braces custom-designed for each patient's teeth. Much of the technology involved in the process is already under patent, but ClearCorrect has gotten around those patents by farming out its intricate computer modeling to an office in Pakistan. That modeling violates a number of US patents — and if ClearCorrect were shipping back the resulting braces in a box, it would be a simple case: the goods would be contraband, to be stopped at the border. But instead, ClearCorrect is only transmitting digital models from Pakistan and printing out the braces in local offices in Texas. The only thing coming in from Pakistan is raw modeling data. So what's a trade commission to do?

In the sweeping and unprecedented decision below, the International Trade Commission found that its authority to regulate trade extends to pure "electronic transmission of digital data" untied to any physical medium. Generally, by statute, the Commission's jurisdiction is limited to oversight of "importation . . . of articles." However, the Commission expansively construed the term "articles" to potentially include anything "bought and sold in commerce," thereby leading to its conclusion that digital data was an article of importation.

The MPAA, which has entered comments in favor of the ITC's self-granted power expansion, wants to use the agency's power over digital imports to block websites at the ISP level. The leaked Jenner & Block memo confirms this. The MPAA's lawyers don't consider it a slam dunk but they are cautiously hopeful that the ITC's land grab will pay off.

As discussed in the 2012 ITC Memo, seeking a site-blocking order in the ITC would appear to offer a number of advantages over federal court litigation, at least at first blush. This now seems even more so given the ITC’s recent decision (albeit now on appeal) holding that electronic transmissions are “articles” within the meaning of Section 337 of the Tariff Act of 1930, 19 U.S.C. § 1337. As also discussed in the 2012 ITC Memo, however, such an action would still involve several difficult questions of first impression, making the prospect of success in that forum uncertain.

While the ITC's new aim -- stopping infringing digital files at the "border" -- would seem to be the ideal starting point, the memo points out that many technical limitations make this approach less than feasible. The "transit" ISPs -- those that "ship in" data from other countries -- can be handled more easily by other court orders than by ITC regulation. The ITC's purview only covers inbound traffic, and technical limitations make this a weaker approach. For one, the lack of information on incoming packets means the blocks would only affect IP addresses. If a "pirate site" shares an IP address with another site, the block won't work. And IP addresses could easily be shared to circumvent blocking at transit ISP level.

The memo also notes that the internet is designed to flow around obstructions. Applying blocks at the transit level would simply shift infringing loads to other pathways, nullifying the blocks altogether.

The law firm then addresses blocking outbound traffic to infringing sites at the ISP level. This would ignore the inbound traffic of "transit" ISPs and demand action be taken by US ISPs.

Even though site blocking by transit ISPs may be impractical in most (and likely all) cases, it may still be possible for the ITC to issue orders to the consumer-facing network access ISPs requiring them to cease and desist from providing their subscribers with access to the pirate site. To do so, however, the ITC would first have to find that the network access ISPs, by providing their subscribers with access to the pirate site, have themselves violated Section 337.

That's the sales pitch for ISP-level site blocking. It somewhat ignores the new powers of the ITC and instead relies on convincing the agency that access to "pirate sites" -- even as a "dumb pipe" -- is a violation of Section 337. Definitions will need to be stretched and ISPs that allow their customers to roam the web freely will need to be painted as contributors to infringing activity.

Because it is the transit ISPs and not the network access ISPs that actually carry the infringing data across the border, we would need to persuade the ITC that the network access ISPs’ conduct is also tantamount to “importation into the United States” of copyright-infringing articles... For this reason, we may be able to develop a case that the network access ISPs, by virtue of the integral role that they play in the process of accessing and delivering infringing content from the foreign site to the end user, should be treated as an importer for purposes of Section 337.

If that doesn't work, the next argument is to portray the ISPs as involved in the sale of counterfeit goods.

Even if we cannot persuade the ITC that network access ISPs are “importers” of the infringing articles, it can plausibly be argued that the network access ISPs are engaged in a post-importation “sale” of the infringing articles to their end-user subscribers, in violation of Section 337. See 19 U.S.C. §1337(a)(1)(B) (providing that “sale after importation into the United States” is an unlawful act). The difficult question presented here is whether an ISP, by providing network access in exchange for its subscribers’ payment, can be found to have engaged in the “sale” of the infringing articles as that term is used in Section 337.

The arguments don't get any less ridiculous. There's a pitch for ISPs to have participated in "unfair acts" by "forcing" (read: allowed customers to access sites the MPAA doesn't like) the motion picture industry to "compete" against infringing copies of its own works. There's even a small paragraph that pushes the notion of contributory infringement, although the law firm notes that this would be the longest shot of all. The likeliest approach appears to be the use of the ITC's power to obtain cease-and-desist orders against ISPs, forbidding them from allowing access to "pirate" sites.

Public Knowledge's brief [pdf link] in opposition to the ITC's pending power shift points out that even though the statute itself is old (Tariff Act of 1930), its authors directly contemplated the difference between physical and more ethereal goods -- and made it clear that the two shouldn't be treated identically.

Evidence from the early 1900s indicates that Congress and others would have cleanly distinguished importation and telecommunication, vesting authority over each in distinct agencies. Treating the Commission as having authority over telecommunications data, then, conflicts with this distinction. To the extent that the Commission’s interpretation of “digital data” as an imported article encompasses such telecommunications data, this Court should reject that erroneous interpretation of the Commission’s purview.

[...]

There is substantial evidence that, around 1930, data transmissions were generally understood to be distinct from articles of commerce and international trade. This understanding influenced Congress, as reflected in its creation of separate and distinct agencies to oversee trade and telecommunications.

The distinction was highlighted by the Supreme Court as early as 1887, in considering one specific type of telecommunications data, namely telegrams:

Other commerce deals only with persons, or with visible and tangible things. But the telegraph transports nothing visible and tangible; it carries only ideas, wishes, orders, and intelligence. Other commerce requires the constant attention and supervision of the carrier for the safety of the persons and property carried. The message of the telegraph passes at once beyond the control of the sender, and reaches the office to which it is sent instantaneously. It is plain, from these essentially different characteristics, that the regulations suitable for one of these kinds of commerce would be entirely inapplicable to the other.

The brief also points out that, while the ITC is correct in noting that internet transmissions couldn't possibly have been envisioned during the crafting of the 1930 Tariff Act, similar "articles" like telecommunications and radio signals had already been discussed by Congress, and each time, these were not allowed to fall under the same regulatory agency.

Putting the ITC in charge of digital transmissions will turn ISPs into ad hoc customs agents who need to inspect incoming packets and outgoing requests. Cloud services would also be negatively affected, as load balancing would need to be rebuilt from the ground up in order to accommodate the legal concerns now inherent in every transmission. The DMCA safe harbor would no longer exist, forcing ISPs to stay one step ahead of IP holders, building in anticipatory takedown response systems and choke points. The MPAA still wants site blocks and is still willing to break the internet to get them. Even the cautiousness displayed in the legal memo still glosses over the severe disruptions this use of the ITC's new powers will cause.

The good news? The ITC's "digital = physical" shift isn't in effect yet. The case prompting this shift is still under appeal and no decision is expected until late 2015. Chances are, this decision will be appealed as well, likely landing it in front of the Supreme Court sometime in the next few years. The MPAA can't move on its arguments until this is all decided. But it's ready to move as soon as it can, and this isn't its only plan of attack.

from the really,-guys? dept

While I still think the biggest story to come out of the Sony hacks is the fact that the MPAA had a plan to fund investigations of Google by public officials to get negotiating leverage over the company, a lot of other interesting tidbits have been revealed as well, including the fact that the MPAA still really, really believes in the idea of site blocking. It has listed it as a "high priority" item that was discussed in a recent anti-piracy strategy meeting bringing together the top lawyers from most of the major Hollywood studios:

As the TorrentFreak article above notes, the MPAA laid out a four prong approach to force site-blocking on the US. The Verge recently posted an MPAA email that described at least some of the strategy as well:

We have traditionally thought of site blocking in the US as a DMCA 512(j) issue. In some ways, that is too narrow and we plan to expand our scope of inquiry on two levels. First, DMCA 512(j), by its terms, necessarily creates an adversarial relationship with the target ISP (and more generally with the ISP community). We have been exploring theories under the All Writs Acts, which, unlike DMCA 512(j), would allow us to obtain court orders requiring site blocking without first having to sue and prove the target ISPs are liable for copyright infringement. This may open up avenues for cooperative arrangements with ISPs. Second, we start from the premise that site blocking is a means to an end (the end being effective measures by ISPs to prevent infringement through notorious pirate sites). There may be other equally effective measures ISPs can take, and that they might be more willing to take voluntarily. Our intention is to work with our own retained experts and Comcast (and MPAA’s Technology group) to identify and study these other possibilities, as well as US site blocking technical issues.

The MPAA is right that 512(j) is likely a dead end. In fact, a legal analysis done by the MPAA's lawyers at Jenner & Block (the MPAA's preferred legal hatchet men) details why. The "All Writs Act" approach is nutty, and would lead to significant push back from a variety of parties (we just recently noted that the DOJ has been trying to use the All Writs Act to get companies to help decrypt encrypted phones). There would undoubtedly be a big legal fight over any such attempt. Other plans, like using the ITC or the Communications Act would also run into problems.

In fact, The Verge also just published some internal legal analysis from Jenner & Block explaining why the ITC route is really risky and unlikely to work, whether targeting transit ISPs (Level3, Cogent, etc...) or access ISPs (Verizon, Comcast, AT&T, etc...). Amusingly, the "alternative" to SOPA that was pushed out by some anti-SOPA folks in Congress actually would have made the ITC route more feasible, but the MPAA was among its loudest critics. And yet now suddenly it's exploring the ITC path? Ha!

Either way, the most insane part of all of this is the fact that, nearly three years after SOPA, the MPAA more or less admits in an email that it hasn't really analyzed the technological impact of site blocking (which was a key component of SOPA) and feels like maybe it should get on it. From the email sent by MPAA General Counsel Steven Fabrizio:

Technical Analyses. Very little systematic work has been completed to understand the technical issues related to site blocking in the US and/or alternative measures IPSs might adopt. We will identify and retain a consulting technical expert to work with us to study these issues. In this context, we will explore which options might lead ISPs to cooperate with us.

Talk about putting the anti-piracy cart before the internet horse...

Meanwhile, the MPAA -- recognizing the shit storm created by SOPA -- has made sure that all of its site blocking efforts are to remain as quiet as possible (oops):

Be cautious about communications on site-blocking—continue building a record of success where possible, but avoid over-communicating and drawing negative attention.... Where site-blocking is actively under consideration, make available research (1) that site-blocking works and (2) that it does not break the Internet (lack of "side effects"). [Do this] in closed-door meetings with policymakers and stakeholders, [but] not necessarily publicized to a wider audience.

Yes, make sure people think site blocking "works" even though the MPAA doesn't have the requisite technical knowledge to understand it. So, in the interest of open source research, I'm going to help the MPAA out a bit and explain to them why site blocking is stupid and massively counterproductive. I mean, they could just look at what's happened in the past few weeks since The Pirate Bay went down, leading tons of other sites to pop up and (as reported in Variety -- normally a keen source of spinning in favor of the studios) the actual impact on infringement online was basically nil.

But, let's take this a step further. Let's say... for example, that the MPAA succeeded in having certain "evil" sites blocked. Thankfully, at about the same time as these meetings were going on, the MPAA also gave Congress a list of the sites it considered "notorious." Let's take one -- how about torrentz.eu -- and do a basic Google Search showing what results would come up if Goliath Google were forced not to link to the site (which is slightly different from site blocking, but the MPAA is also talking about similar efforts to get full domains "removed" from Google as an alternative to site blocking -- and the end results would be pretty much the same thing). Take a look:

If you can't see it, it's basically a bunch of links to pages listing out where you can go instead of that particular site. In short, site blocking is stupid. It won't actually cut down on any infringing activity, and it's easily gotten around, whether by VPNs or just by doing a rather basic search. Now, of course, the MPAA and its friends would likely still blame Google for this state of affairs, but I'm curious how the MPAA contends that Google should return results on such a site if it's been blocked or removed from search? How could it possibly also block out links to sites that list alternatives? Or is part of the plan to expand the censorship all the way down the pile so that any site that even mentions sites that the MPAA declares "notorious" also need to be blocked? Because if that's the case, they're going to run into a pretty massive First Amendment question before long.

The problem -- as always -- is that the MPAA still thinks that the public is stupid, and that if they can successfully "block" sites that people will stop looking for alternatives. The reality is that the way to get people to stop looking for unauthorized alternatives is to make better authorized alternatives -- but that's clearly still not a priority for the MPAA. And that's a real shame.

And none of this even touches on the problems with false positives (something that's already happened a bunch) or how site blocking might seriously screw up certain security setups, like DNSSEC (something the MPAA was clearly warned about during the SOPA fight, but which it still seems to deny is a real problem). In fact, during a recent secret "Site Blocking" meeting by the MPAA, it still appears to mock the idea that site blocking would break the internet by messing up DNSSEC. That's because the MPAA still doesn't seem to fundamentally understand the issues at play. If they actually talked to some real engineers at ISPs, maybe they'd learn that this whole infatuation is misguided and won't work.

In short, the MPAA sees site blocking as a priority because it doesn't understand the first thing about site blocking and why it would fail -- and that's speaking legally, technically and using just basic common sense. So why is the MPAA so focused on that, rather than actually innovating and adapting? This is what happens when you put a bunch of litigators, rather than innovators, in charge.

from the good-response-to-a-bad-situation dept

Well, that was fast. We just had our post about the unfortunate trademark situation that Sparkfun found itself in, with 2,000 multimeters held by US Customs at the border because they happened to have a yellow outside, and multimeter king Fluke happened to trademark an aspect of that look. Fluke, of course, had no direct hand in stopping this particular shipment, but had (a) gotten that trademark and (b) years ago gone to the ITC to get an injunction against other multimeter makers.

That said, it appears that Fluke's management recognizes how this kind of situation can spiral out of control, and after spending about a day understanding the details, made a public offer to Sparkfun: giving the company a pile of Fluke multimeters and letting Sparkfun do what they want with them (sell them, donate them, burn them in a pyre, whatever). As Fluke notes, the value of the equipment it's giving Sparkfun exceeds the lost shipment:

Earlier today we contacted SparkFun and offered to provide a shipment of genuine Fluke equipment, free of charge for them to sell on their site or donate. The value of the equipment exceeds the value of the Customs-held shipment. SparkFun can resell the Fluke gear, recouping the cost of their impounded shipment, or donate it into the Maker community.

While we will continue to enforce our trademark, we are taking this one-time action because we believe in the work of SparkFun supporting the Maker and education communities. This is important to us. We have been supporters of the Maker community for years through the donation of over half a million dollars worth of tools and employee time to organizations like First Robotics.

Sparkfun accepted and has announced it will be donating the multimeters to educational institutions and schools. Given the situation and potential PR headache for Fluke, this was probably the best solution.

It's not perfect however. There is still a shipment of 2,000 perfectly good hobbyist-level multimeters that are about to be destroyed for no good reason thanks to trademark law (what was that people were saying about trademarks being about "protecting" property rights? Seems like the opposite here...). Also, Fluke insists that it's going to continue to be aggressive about its trademarks in a somewhat misleading way:

Like any organization that designs and manufactures electronics, we actively work to stop lookalike products from making it to the marketplace. We do this to protect our company and the jobs of our employees. We also do so because it is a matter of safety for our customers. Our tools are used in high-energy industrial environments, where precision and safety is an absolute necessity.

I mention this because we firmly believe that we must be – and will continue to be – vigilant in protecting Fluke and our customers. One step in doing that was registering a trademark protecting the look and feel of our devices so our customers know that if it looks like a Fluke it’s a Fluke.

While it is true that trademark law, when used properly, should be about consumer protection, it seems to be going a bit far to suggest that a broad trademark on multimeters with a yellow and gray outer coating should give one company exclusivity over such a look. There is no indication that people were somehow confusing hobbyist-level multimeters like Sparkfun's with Fluke's high-end versions, nor any indication that anyone was using the cheap multimeters in a manner that put people at risk.

All in all, it's good to see Fluke quickly respond and try to make the best of the situation, but the underlying setup is still problematic.

from the this-is-stupid dept

As pretty much all of you have been sending in, our favorite open source electronics firm, Sparkfun, has found itself in the middle of yet another unfortunate intellectual property issue that highlights how broken intellectual property law continues to be. In short, SparkFun needs to pay to have $30,000 worth of multimeters (2,000 of them) destroyed because they're yellow and because trademark law is stupid. Basically, electronics maker Fluke holds trademark 2796480, which is described thusly:

The mark consists of the colors dark gray and yellow as applied to the goods. The dotted outline of the goods is intended to show the position of the mark and is not a part of the mark.

The trademark makes clear that it is not claiming a trademark on the color yellow, but rather dark gray and yellow applied to something that looks like this:

Now, here's Sparkfun's multimeter:

And, apparently, while having these 2,000 multimeters shipped from China to the US, they were stopped by Customs because of an ITC ruling (warning: big pdf file behind that link) that blocks the import of:

digital multimeters and products with multimeter functionality that have a contrasting color combination of a dark-colored body or face and a contrasting yellow border, frame, molding, overlay, holster or perimeter.

And this is based on claims that other companies were violating that Fluke trademark we discussed above. As the folks at Sparkfun point out, this is all kinds of ridiculous and immensely damaging to them:

Yellow is awfully broad: In my mind, multimeters have always been yellow. I’ve never had the opportunity to own a Fluke-branded DMM so I’m not sure where my brain picked up this association. I can respect trademarks and company branding and I respect Fluke’s reputation for high-quality multimeters. If Fluke wants to own a color I would expect the USPTO to require them to assign an exact color just like Tiffany’s did with Tiffany Blue. But allowing a company to trademark ‘yellow’ seems broad.

Wicked burden on small business: Trademark law is heavily skewed towards large business. Small business does not have the resources to stay abreast of all trademarks for all the products they don’t carry. If you’re going to put the onus on the little guy to avoid infringing IP then you shouldn’t need an army of consultants or attorneys to find this information. We will lose $30,000 on this shipment. But the cost of the legal legwork and manpower to make sure we don’t violate a future color seems unreasonable and simply not feasible.

No recourse: Our multimeters are actually kind of orange, not Fluke yellow. The document from the Department of Homeland Security is matter of fact. Where is the opportunity for recourse? What is the appeals process? Because of a $150 per day warehousing fee we are forced to decide quickly with limited legal guidance and mounting penalty costs.

Decide between bad and worse: So we really only have two options, ship them back or have them destroyed. Having them destroyed costs $150 per hour with no indication of how much time it will take to destroy 2,000 units. Returning them has been ruled out by the manufacturer in China because the import taxes in China are so steep (yay free trade) that bringing them back into the country to have them modified would be more expensive than paying for the return shipping and taxes. Between bad and worse, we have to have them destroyed. Sorry Earth.

To be fair, the first point is slightly misleading. This isn't a color trademark like Tiffany Blue or the variety of other trademarks that have issued in the past (though many of those are ridiculous in their own right), but a specific trademark about how the color is used on a specific product. It's still ridiculous and makes no sense, but it's not directly comparable to color trademarks (which, again, are also ridiculous).

Sparkfun is using the publicity around the blog post in the hopes that Fluke might grant them a brief license to save these multimeters, but admits that's unlikely. The company is also changing the color of its multimeters, but likely going to need to eat the cost of the ones about to be destroyed. Because trademark law is, yet again, pretty ridiculous.

from the well-that's-interesting dept

For years, we've been watching how patent holders get two cracks at the proverbial (and, in this case, literal) Apple when it comes to patents. They can sue in court for patent infringement and -- in an entirely separate process -- they can go to the International Trade Commission, and argue their case as well. The regular courts and ITC judges use different criteria for judging the outcome, and also have different remedies (though with some overlap). The ITC can't award monetary damages, but can issue an injunction, barring the importation of infringing products. Over the past few years, the ITC side of things has troubled a growing number of people, and even President Obama targeted some of the problems with the ITC patent review process in his big announcement on fixing the patent system.

Still, in a somewhat surprising move, Obama's recently appointed US Trade Rep., Michael Froman, has stepped in to directly overturn an ITC injunction issued against Apple products -- including iPhones and iPads, after the ITC sided with Samsung, saying that those devices violated Samsung's patents. The decision by Froman is final -- Samsung can't appeal, and it means that those iPhones and iPads won't get blocked at customs, as would likely have happened otherwise. You can read Froman's letter about this, in which he delves into some detail about the administration's worries about "patent hold up" -- mainly on standards-essential patents (SEPs) that have so-called FRAND (fair, reasonable and non-discriminatory) licensing commitments. As the letter notes:

After extensive consultations with the agencies of the Trade Policy Staff Committee and the
Trade Policy Review Group, as well as other interested agencies and persons, I have decided to
disapprove the USITC's determination to issue an exclusion order and cease and desist order in
this investigation. This decision is based on my review of the various policy considerations
discussed above as they relate to the effect on competitive conditions in the U.S. economy and
the effect on U.S. consumers.

I would like to underscore that in any future cases involving SEPS that are subject to voluntary
FRAND commitments, the Commission should be certain to (1) to examine thoroughly and
carefully on its own initiative the public interest issues presented both at the outset of its
proceeding and when determining whether a particular remedy is in the public interest and (2)
seek proactively to have the parties develop a comprehensive factual record related to these
issues in the proceedings before the Administrative Law Judge and during the formal remedy
phase of the investigation before the Commission, including information on the standards-
essential nature of the patent at issue if contested by the patent holder and the presence or
absence of patent hold-up or reverse hold-up. In addition, the Commission should make explicit
findings on these issues to the maximum extent possible. I will look for these elements in any
future decisions involving FRAND-encumbered SEPs that are presented for policy review. The
Commission is well-positioned to consider these issues in its public interest determinations.

He also notes that Samsung can continue its fight in the courts.

This is still something of a surprising move -- more or less having the administration step in and flat out overrule a patent infringement ruling for "public policy reasons." Hopefully, this signals a bit of a change in understanding under the new USTR, such that there's a real recognition that overaggressive intellectual property laws and enforcement can have a seriously negative impact. Of course, the more cynical among you might note that this is also the US government stepping in to protect the US company (Apple) against a foreign company (Samsung). An even more cynical group might further note that the Obama administration also probably didn't want to deal with the headache of headlines about how the federal government had suddenly banned a bunch of iPhones and iPads... But, for the sake of being optimistic, let's hope that this really is a sign of a more thoughtful USTR, which isn't quite as wedded to intellectual property maximalism, as its predecessors have been.

from the well-that's-nice dept

Back in February, we were a bit surprised during President Obama's "Fireside Hangout" when he appeared to speak out against patent trolls. Historically, most politicians had always tiptoed around the issue, in part because the pharma industry seems to view any attack on patent trolls as an existential threat -- and, frankly, because some small time patent holders can also make a lot of noise. However, it's become exceptionally clear that there's political will to take on patent trolls. We've noted five different patent law bills introduced in Congress, all targeting patent trolls in one form or another.

And now, it's been reported that President Obama is going to come out strongly against patent trolling, directing the USPTO and others to fix certain issues, while also asking Congress to pass further laws to deal with patent trolling. The President will flat out note that patent trolls represent a "drain on the American economy." The announcement will directly say that "patent trolls" (yes, they use the phrase) are a problem, while also talking about the problem of patent thickets like the infamous "smartphone wars."

The plan is scheduled to be released later today, but we've got a preview of the specific plan, and let's take a look at each of the suggestions quickly. I'm sure we'll be discussing the concepts in much more detail for the near future. The plan is split into two different parts: legislative actions (i.e., asking Congress to do something) and executive actions (i.e., ordering administration agencies/departments to do things). Let's start with the executive actions, since those are likely to have the more immediate impact.

Making “Real Party-in-Interest” the New Default. Patent trolls often set up shell
companies to hide their activities and enable their abusive litigation and extraction of
settlements. This tactic prevents those facing litigation from knowing the full extent of the
patents that their adversaries hold when negotiating settlements, or even knowing
connections between multiple trolls. The PTO will begin a rulemaking process to require
patent applicants and owners to regularly update ownership information when they are
involved in proceedings before the PTO, specifically designating the “ultimate parent entity”
in control of the patent or application.

We were just discussing this issue because of the This American Life episode where Intellectual Ventures was able to hide behind a shell, something it's been accused of doing many, many times. This is also one of the proposals we've seen in Congress. The details here will matter, and note that, with this, it will only apply to patents that are involved in proceedings before the PTO. It's a step in the right direction, but clearly could go much further -- though, much of that needs to be done legislatively (see below). Also, the definition of "in control of" may need to be specific here. In the TAL story, IV got 90% of the profits but argued that it had no actual control over the patent.

Tightening Functional Claiming. The AIA made important improvements to the
examination process and overall patent quality, but stakeholders remain concerned about
patents with overly broad claims — particularly in the context of software. The PTO will
provide new targeted training to its examiners on scrutiny of functional claims and will, over 3
the next six months develop strategies to improve claim clarity, such as by use of glossaries
in patent specifications to assist examiners in the software field.

This is a big one, and everyone, if you get a chance, go thank Mark Lemley for campaigning strongly on this point over the last year. Lemley has been pointing out for quite some time that the broadness of software patents almost certainly violates the 1952 Patent Act's prohibition on so-called "functional claiming." In short, these are claims to a general function, rather than a specific solution. So... claiming a patent on "podcasting" rather than a very specific way of doing podcasting. Telling the USPTO to retrain examiners to recognize functional claims as ineligible for patent protection could be very helpful in knocking out a lot of bad patents in the future.

Empowering Downstream Users. Patent trolls are increasingly targeting Main Street
retailers, consumers and other end-users of products containing patented technology — for
instance, for using point-of-sale software or a particular business method. End-users should
not be subject to lawsuits for simply using a product as intended, and need an easier way to
know their rights before entering into costly litigation or settlement. The PTO will publish
new education and outreach materials, including an accessible, plain-English web site
offering answers to common questions by those facing demands from a possible troll.

This is an increasing problem, which we've discussed a bunch of times, with the various patent lawsuits against podcasters, cafes offering WiFi and networked scanners. Of course, providing them "education and outreach materials" seems like a weak response, but that may be all that's possible at the exec level on that front. The legislative side (which we'll get to) tries to tackle this problem more broadly.

Expanding Dedicated Outreach and Study. Challenges to U.S. innovation using tools
available in the patent space are particularly dynamic, and require both dedicated attention
and meaningful data. Engagement with stakeholders — including patent holders, research
institutions, consumer advocates, public interest groups, and the general public — is also an
important part of our work moving forward. Roundtables and workshops that the PTO, DOJ,
and FTC have held in 2012 have offered invaluable input to this process. We are announcing
an expansion of our outreach efforts, including six months of high-profile events across the
country to develop new ideas and consensus around updates to patent policies and laws. We
are also announcing an expansion of the PTO Edison Scholars Program, which will bring
distinguished academic experts to the PTO to develop — and make available to the public —
more robust data and research on the issues bearing on abusive litigation

Yes, more outreach is important. While some may brush this off as meaningless, those who don't spend any time around actual innovators facing regular patent shakedowns really just don't realize how big a problem this is.

Strengthen Enforcement Process of Exclusion Orders. Once the U.S. International Trade
Commission (ITC) finds a violation of Section 337 and issues an exclusion order barring the
importation of infringing goods, Customs and Border Protection (CBP) and the ITC are
responsible for determining whether imported articles fall within the scope of the exclusion
order. Implementing these orders present unique challenges given these shared
responsibilities and the complexity of making this determination, particularly in cases in
which a technologically sophisticated product such as a smartphone has been successfully
redesigned to not fall within the scope of the exclusion order. To address this concern, the
U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of
existing procedures that CBP and the ITC use to evaluate the scope of exclusion orders and
work to ensure the process and standards utilized during exclusion order enforcement
activities are transparent, effective, and efficient.

This is a specific issue specifically related to the ITC efforts (more on that in a bit), which would be helpful, but won't move the needle for most patent disputes.

So, the executive actions represent a recognition of the nature of the problem, and have some good ideas on how to deal with it under existing law (the functional claiming bit could be huge), but there are still limitations from the law. And that's where Congress comes in. Here are the President's suggestions:

Require patentees and applicants to disclose the “Real Party-in-Interest,” by requiring
any party sending demand letters, filing an infringement suit or seeking PTO review of a 2
patent to file updated ownership information, and enabling the PTO or district courts to
impose sanctions for non-compliance.

Above, we noted that he's already telling the PTO to require this for issues before the PTO, so this is asking Congress to extend that mandate to cover all the other situations, down to sending a demand letter. Without this, the orders to the PTO above are a lot less helpful, since owners could still hide behind a patent until it went up before the PTO. Having Congress add this component would, hopefully, severely minimize the shell companies and hidden owners issues with patents.

Permit more discretion in awarding fees to prevailing parties in patent cases, providing
district courts with more discretion to award attorney’s fees under 35 USC 285 as a sanction
for abusive court filings (similar to the legal standard that applies in copyright infringement
cases).

This is similar to the proposal first floated in Congress last year. Basically, this will allow those who are hit with a bogus patent lawsuit to seek legal fees. The "legal standard" here is a bit too high, as we've seen that it's still quite rare (though not unheard of) to see fees awarded in copyright cases. Still, it could weed out the worst of the worst.

Expand the PTO’s transitional program for covered business method patents to include a
broader category of computer-enabled patents and permit a wider range of challengers to
petition for review of issued patents before the Patent Trial and Appeals Board (PTAB).

This is basically Senator Schumer's bill, and we're all for it. Making it easier and faster to get the USPTO to dump bad patents? Yes, please.

Protect off-the-shelf use by consumers and businesses by providing them with better legal
protection against liability for a product being used off-the-shelf and solely for its intended
use. Also, stay judicial proceedings against such consumers when an infringement suit has
also been brought against a vendor, retailer, or manufacturer.

As mentioned above this is a relatively new, but quickly growing issue. Of course, the details here mater quite a bit. Better legal protection against liability sounds great, but the wording and the specifics will matter. Still, this brief description sounds right. Using a WiFi network you bought in a store for exactly what it says it will do shouldn't lead to you facing a patent troll suit. Same with using the "scan to email" function on your office scanner.

Change the ITC standard for obtaining an injunction to better align it with the traditional
four-factor test in eBay Inc. v. MercExchange, to enhance consistency in the standards
applied at the ITC and district courts.

This is important. We've talked for years about the ITC loophole that trolls have been exploiting lately. Basically, this gives patent holders two cracks at anyone they're going after, once in the courts and once at the ITC. Even worse, the ITC is not (currently) bound to follow the rules set out by the Supreme Court. This proposal would try to make the ITC process aligned with what the Supreme Court said in the very important MercExchange ruling. Prior to MercExchange, courts would commonly issue an injunction, barring the production or sale of products found to be infringing. So, say your smartphone was infringing on a single patent for a tiny little bit. The patent holder could cause the entire product to be blocked from sale if you're found to infringe. That's crazy.

Under the MercExchange ruling, the courts were told to take a more reasonable view of things, and to see if other remedies might be less harmful to innovation. Of course, with the ITC, the only power they have is to issue an injunction. That is, they can't require royalty payments or anything like that. So, if they have to follow MercExchange, it could just mean that even if they find a product infringing, they could still decide not to issue an injunction.

Use demand letter transparency to help curb abusive suits, incentivizing public filing of
demand letters in a way that makes them accessible and searchable to the public.

This is another good one. We've written a few times about the practice of some trolls to try to even keep their demands secret, such that many who receive demand letters don't know that they're one of a group -- and a group that might team up to fight back against bogus threats. Basically, it sounds like this might help lead to a "Chilling Effects" website for troll demands. That sounds quite useful

Ensure the ITC has adequate flexibility in hiring qualified Administrative Law Judges.

Further to the ITC point above -- though this seems more specific to just making the ITC feel a little less overwhelmed with all the cases coming its way lately.

All in all, it's a pretty comprehensive proposal with a lot of good ideas -- nearly all of which have been discussed or proposed in Congress already. So there really aren't any "shockers" other than the fact that the White House really seems to be taking this issue seriously, and that should lead to some action in Congress.

That said, get ready for the pushback. Pharmaceutical companies, giant patent trolls like Intellectual Ventures (and some other legacy tech companies who are long past their innovation days) and a gaggle of people claiming vaguely to represent "small inventors" are about to go ballistic over these proposed changes, and will seek to block any real progress, while simultaneously looking to water down the proposals as much as possible. It's what they did the last time, and it worked. Of course, the problem has only gotten progressively worse since then, so hopefully people realize that their complaints are really more about protecting their own chosen business models, rather than innovation as a whole.

Finally, it'll probably come as no surprise that I think there are many other proposals that would have been nice to see. A couple years ago I wrote a post suggesting what real patent reform should entail, and I still think many of those suggestions would be useful, including a real independent inventor defense, the use of independent invention as a sign of obviousness, and having patent examiners in the PTO include talking to actual people skilled in the art (i.e, people in the field working) to explore whether or not a patent application passes the "non-obvious to those skilled in the art" test. I'm still hopeful that eventually these suggestions will be picked up, but until then, the suggestions above are definitely a good start.

from the is-there-nothing-those-numbers-can't-do? dept

For many years, we've talked about just how bogus the numbers are that get thrown around for "losses" and "job losses" due to copyright infringement. And yet they keep getting repeated. Two years ago, we were particularly stunned by a report from the ITC that claimed $48 billion dollars in losses directly due to Chinese piracy. But, as we looked at the methodology, the whole thing was completely ridiculous. It was based on just asking a bunch of companies how much they thought they must have lost to Chinese infringement. Not only is that a horribly unreliable and biased way to try to determine what's actually going on, it's difficult to see how companies would even know that information in the first place.

Outside of piracy, we've also noted that the stats used to support "cybercrime" and "cybersecurity" efforts are often just as bogus. And here we have a story that brings the two subjects together.

SongLifter points us to a NY Post article about Chinese cyberhacking which builds off of the Mandiant report that got so much attention. The article is bizarre in that it claims that the US isn't fighting back against Chinese hackers and somehow that we're sitting on our hands while a great "cyberwar" is being waged against us. Apparently, the author, Ralph Peters, is wholly unaware that some of the only confirmed "attacks" via a computer system were by the US. All this "woe is us" hand-wringing is just bizarre. But then Rogers tosses out these bogus and debunked numbers as if they're proof that we must attack China online:

According to the US International Trade Commission, Chinese intellectual property theft cost the United States $48 billion in 2009, as well as taking away 2 million jobs. Since then, the amount of theft has worsened, so the total loss is likely around $300 billion. But US companies, afraid that making their losses public will shake consumer confidence, won’t go public with their outrage.

Except, there's no way those numbers are even close to accurate. Again, they're based on self-reporting, and any estimate of "value" is guaranteed to be grossly overweighted. Then, take those numbers and, for reasons that make no sense at all, you don't just "grow" the $48 billion, but expand it more than six times to claim it must be up to $300 billion by now? Really? And we're using that totally bogus and made up number as the basis of an argument for why we need to kick off a "cyberattack" on China? As if that won't escalate things even further? Incredible.